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Purpose The paper aims to investigate whether the Islamic banks (IBs) and the conventional banks (CBs) could be distinguished from one another on the basis of their capital structure, profitability and their respective determinants with using a multivariate statistical method for analysis of data. Design/methodology/approach The paper provides a comparative study based on a predictive model, the binary logistic regression, using a sample of 53 listed CBs and 45 listed IBs from the Middle East region for the period 2006-2014. Findings The binary logistic regression reveals that profitability and capital structure are good predictors that help to distinguish between the two categories of banks. Results suggest that higher are the net margin and capital ratio, higher is the probability that the bank is Islamic. For the return on assets, results show that lower is this value; higher is the likelihood that the bank is Islamic. Regarding their related determinants, the findings suggest first that banks with higher dividend payout policy, financing ratio, costs ratio and insolvency risk are more likely to be Islamic. Second, results suggest that banks with lower collaterals, size and credit risk are more likely to be Islamic. Research limitations/implications The study contributes to the growing literature on corporate finance and Islamic banking. Analyzing the capital structure and profitability of the two categories of banks is important for investors, financial analysts and regulators. Understanding the differences contributes to understand how following Islamic finance principles and being under Sharīʿah governance could impact the bank profitability and financial decision, as well as investors behavior. Originality/value The study contributes to the scare literature dedicated to the use of the multivariate statistical methods for the analysis of data to compare the financial characteristics of IBs and CBs.

HighlightsWe identify the displaced commercial risk DCR exposure of Islamic banks. We identify the scenarios of displaced commercial risk exposure to compute the DCR Profits and Losses to Islamic banks shareholders. Scenarios of risk depend on the actual rate of return on investment accounts, the benchmark rate of return and level of existing reserves to mitigate the DCR. We assess the capital charge needed to cover the displaced commercial risk using the Value-at-risk measure of risk, DCR-VaR. We assess the coefficient alpha α CAR-VaR for the capital adequacy ratio for Islamic banks.We consider three methods, the Historical non-parametric VaR, the parametric-VaR and the Extreme Value Theory-VaR. AbstractThe objective of the research is to quantify the displaced commercial risk (DCR) based on quantitative finance techniques. We develop an internal model based on the Value-at-risk (VaR) measure of risk to assess the DCR-VaR and the alpha coefficient in the capital adequacy ratio of Islamic banks. We identify first the scenarios of exposure of Islamic banks to DCR that depend on the actual return on unrestricted profit sharing investment accounts (PSIA U ), the benchmark return as well as the level of the existing profit equalization reserve (PER) and investment risk reserve (IRR). Second, we quantify the DCR-VaR and the alpha coefficient for a given holding period and for given confidence level. We illustrate the DCR-VaR model on selected Islamic banks from Bahrain. Our model helps to better assess the needed equity to cover the DCR and an accurate capital adequacy ratio for Islamic banks. The model has also policy implications for regulators and the IFSB to develop better guidance on good practices in managing this risk.

PurposeThe purpose of this study is to investigate the value relevance of accounting information for Islamic, conventional and hybrid banks. It also investigates the moderation impact of IFRS adoption and AAOIFI mandatory adoption on value relevance of accounting information.Design/methodology/approachUsing value relevance models, The authors run panel data regressions on 47 Islamic banks, 112 conventional banks and 42 hybrid banks (conventional banks with Islamic windows). The study covers listed banks from 14 countries over the period 2010–2018.Findingspaper offers three empirical evidences. First, the authors find that value relevance of accounting information is higher for Islamic banks, compared to conventional banks. Second, the authors find that IFRS framework strengthens the relevance of accounting information in Islamic banks, but the authors did not find the same for hybrid banks. Third, the authors find that the mandatory adoption of AAOIFI accounting standards has a moderation effect on value relevance of accounting information for both Islamic banks and hybrid banks. The robustness analysis shows that there is a significant contribution of compliance with Islamic Finance rules in IBs and HBs, which substantially reduces managers' opportunistic behavior to manage accounting information.Research limitations/implicationsOne limit of this research is the reduced number of sampled listed IBs since the authors deleted countries that do not have both listed Islamic and conventional banks.Practical implicationsThe study is useful for investors that consider the Islamic ethical practices to make their investment decisions as well as for the standards-setting bodies that focus on establishing accounting standards for the Islamic banking industry.Originality/valueThe authors contribute to the value relevance literature by providing novel evidence on the value relevance in fully-fledged Islamic, fully-fledged conventional and hybrid Banks. The authors also provide new evidence on the moderating role of International Financial Reporting Standards (IFRS) and Auditing Organization for Islamic Financial Institutions standard (AAOIFI) for the value relevance of accounting information.

L’objectif de notre article est d’étudier de manière approfondie le risque commercial déplacé, un risque propre aux banques islamiques. Ce risque résulte de la gestion des comptes d’investissement participatifs non restrictifs. Il découle plus spécifiquement du comportement de leurs titulaires, qui, insatisfaits de la rémunération aléatoire offerte par leur banque, peuvent retirer leurs fonds, faisant courir un grave risque d’illiquidité à l’établissement. Sous pression commerciale, les banques islamiques sont obligées de violer le principe de partage des profits avec les titulaires des comptes d’investissement et lissent ainsi les revenus associés à ces comptes pour atténuer le risque commercial déplacé. Ces pratiques bancaires ont des conséquences sur la réglementation prudentielle des banques islamiques. Les dispositifs existants actuellement, notamment de l’IFSB, ne sont pas efficaces et plusieurs critiques peuvent y être adressées. La principale limite de l’apport de l’IFSB est le caractère arbitraire, forfaitaire et indifférencié de la mesure proposée du risque commercial déplacé.